Self-employed individuals will receive a state pension through the new ‘flat rate’ scheme. In recent years, there have been several changes to the eligibility criteria, so now may be a good time to check what you’re entitled to.
Most people do not realise that it’s actually up to the individual to keep track of their own entitlement and ensure that it is correct. Over the course of your working life this can be difficult but sorting out problems with the state pension when the time comes to retire could prove even harder. We recommend you carry out a quick check of your position every four or five years.
State pension entitlement if you have been self-employed
A recent case highlights some of the historic problems with the state pension.
The taxpayer retired in 2013. From 1965 until retiring he was both employed and self-employed. Dissatisfied with his state pension on retirement, he queried his National Insurance Contributions (NIC) record. He received a full breakdown of all the contributions he had made during his career and queried several matters on the breakdown, including the periods of nil payment in 1993/94 to 1996/97.
The taxpayer appealed his NIC record from 1965 to 2013 on various grounds, including:
- that HMRC was obliged to send him statements showing NIC due
- that he was submitting income tax returns for the same period – and the Inland Revenue and National Insurance Contributions Agency must have shared the information.
In summary, the Tribunal held that the onus was on the taxpayer to have sorted things out during his working life. There were limits to what he could do at the time of retirement.
Child Benefit could affect your entitlement to state pension
A parent can receive £20.70 Child Benefit a week for their first child and £13.70 a week for each additional child. If an individual (or their partner) has an income of more than £60,000, all the Child Benefit will need to be repaid by an increase in tax liabilities of the higher earner. To avoid this, the individual can choose not to receive the Child Benefit at all. However, if they opt out of receiving Child Benefit, some ‘stay at home’ parents will miss out on accruing entitlement to the state pension.
The best advice to ensure you don’t miss out is to complete the Child Benefit form – which can be filled in online or printed out. The government also recommends you do this.
You can also check your state pension online.
What to do if you think your pension forecast is wrong
Once you’ve checked your forecast, if you think something is incorrect, please get in touch. It’s much easier to sort out potential issues now than when you are ready to retire.